Alliant Techsystems Announces Third-Quarter Net Earnings (Jan. 27)
MINNEAPOLIS --- Alliant Techsystems said third-quarter net earnings per share were $1.45 before a one-time extraordinary charge, up from $1.33 a year ago. For the nine months ended Dec. 27, net earnings per share before extraordinary charges were $3.96 versus $3.62 in the same period a year ago. Third-quarter net income before the charge was $18.0 million, approximately equal to last year. For the nine-month period, net income before charges was $50.5 million, compared with $48.6 million a year ago. Sales in the third quarter were $274 million, compared with $269 million a year ago. Year-to-date sales totaled $790 million versus $788 million last year. Third-quarter orders rose to $337 million from $236 million last year, bringing year-to-date orders to $1.5 billion versus $794 million a year ago. The strong increase in orders brought backlog at the end of the third quarter to $2.4 billion or 26 months of equivalent sales, up from $1.4 billion or 15 months of equivalent sales a year ago. Extraordinary charges for the early extinguishment of debt, net of taxes, totaled $1.7 million or 13 cents per share in the third quarter and $16.3 million or $1.28 per share in the nine-month period. During the second quarter, the company began the early repurchase of $150 million of outstanding 11 3/4% senior subordinated notes that were due March 1, 2003. The final $10 million of those notes is expected to be repurchased by the end of fiscal year 1999. Including the charges, net income was $16.4 million or $1.32 per share in the third quarter and $34.2 million or $2.68 per share in the nine-month period. Paul David Miller, chairman and chief executive officer, said Alliant's third-quarter results keep the company on a solid path to grow earnings per share at an average of 15 percent. "Our performance is the result of focusing on the fundamentals of the business: winning new contracts, reducing costs, increasing margins, and improving cash flow,'' said Miller. "At the same time, we have strengthened our financial position through the repurchase of high-cost debt, and by repurchasing shares through a recently completed Dutch auction tender offer. We are entering the final quarter of the year in a strong position, with good year-to-date earnings and record backlog.'' Miller took over the leadership of Alliant on Jan. 1, when he assumed the duties of chief executive officer from Peter A. Bukowick, who had served as acting CEO since Sept. 1, 1998, when Richard Schwartz stepped down from that post. Bukowick remains as president and chief operating officer of the company. Miller also became chairman of the board of directors on Jan. 1, replacing Schwartz, who retired from the board on that date.
Business Group Sales The Conventional Munitions Group reported third-quarter sales of $110 million, compared with $112 million last year. Sales from the Space and Strategic Systems Group rose to $98 million from $93 million last year. The Defense Systems Group posted third-quarter sales of $69 million versus $65 million last year. Year-to-date sales from the Conventional Munitions Group were $350 million versus $345 million a year ago. The Space and Strategic Systems Group reported nine-month sales of $292 million, up from $267 million last year on the strength of higher volume from space propulsion programs. The Defense Systems Group posted sales of $153 million, compared with $172 million in the comparable period a year-ago. The decline in Defense Systems sales is primarily due to lower volume from the Outrider(TM) Tactical Unmanned Aerial Vehicle program, which completed a technology demonstration in 1998. The program is being evaluated to determine if it will enter low-rate production.
Building Blocks for Earnings Growth Miller said Alliant continues to make steady progress toward its goal of 15-percent annual earnings growth. Consistent with its core business strategy to be a key supplier to the largest prime contractors, Alliant entered into a new strategic alliance agreement with Raytheon Company during the third quarter that will make it a preferred supplier to Raytheon Missile Systems. Under the agreement, Alliant and Raytheon Missile Systems will work together on integrated product teams to identify next-generation products, define requirements, execute program strategies, exchange technologies, and pursue international opportunities. Operational initiatives will include the identification and implementation of cost reduction and quality programs. Under a separate product agreement that could lead to orders of at least $235 million over the next nine years, Alliant will supply tactical missile rocket motors and warheads to Raytheon Missile Systems. Also during the third quarter, Alliant was awarded two contracts valued at $18 million to upgrade the AN/AAR-47 Missile Warning System. If exercised, production options could raise the total value of the contracts to approximately $175 million through 2003. In December, Alliant was awarded a $5 million contract to build and demonstrate a tactical munition system that can serve as an alternative to anti-personnel landmines. Following an evaluation of three competing systems, a single design will be selected at the end of this year. The winning contractor then will begin a 30-month engineering and manufacturing development phase that will lead to type classification and a production decision in 2002. Alliant continued to make progress toward its goal to raise EBIT (earnings before interest and income taxes) margins to above 10 percent. Year-to-date EBIT margins were 9.4 percent, up from 8.6 percent in the nine-month period a year ago. The improvement reflects lower operating expenses and continued strong demand for space propulsion products. Key strategies to improve margins include reducing manufacturing and overhead expenses and focusing on process control to improve quality, product repeatability, and profitability. Year-to-date cash flow as indicated by earnings before interest, taxes, depreciation, and amortization (EBITDA) was $108 million or $8.45 per share, compared with $104 million or $7.70 per share in the same period a year ago. Free cash flow (cash from operations less capital expenditures) during the nine-month period was $1.7 million, compared with $(5.7) million last year. The improvement, which comes from an ongoing focus on cash management, resulted in a $23.7 million increase in cash flow from operations over the prior-year period. The increase more than offset a $16.3 million increase in capital expenditures for facility upgrades in anticipation of new space propulsion, composite structures, and military fuze production business. During the third quarter, Alliant purchased more than 1.9 million shares of its common stock. Of the total, 1.68 million shares were purchased at $77 a share under a Dutch auction tender offer completed in December. The shares represent approximately 13.8 percent of the company's shares outstanding immediately prior to the offer, which began Nov. 6, 1998. Following completion of the tender offer, the company's board of directors authorized a share repurchase program covering up to 1.1 million additional shares. Alliant also repurchased the final 271,000 shares of company stock that were part of a 1.1 million-share block owned by Hercules, Incorporated. At the end of the third quarter, there were approximately 10.5 million shares outstanding. Alliant also entered into new credit facilities to refinance existing borrowings, fund share repurchases, and provide for working capital and other general corporate requirements.
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